SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
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EXCHANGE ACT OF 1934.
For the quarterly period ended September 30, 1999
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OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
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EXCHANGE ACT OF 1934.
For the transition period from to
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Commission file number 0-11126
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BALCOR EQUITY PROPERTIES-XII
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(Exact name of registrant as specified in its charter)
Illinois 36-3169763
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2355 Waukegan Road
Bannockburn, Illinois 60015
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (847) 267-1600
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Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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BALCOR EQUITY PROPERTIES - XII
(An Illinois Limited Partnership)
BALANCE SHEETS
September 30, 1999 and December 31, 1998
(Unaudited)
ASSETS
1999 1998
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Cash and cash equivalents $ 1,393,765 $ 1,407,779
Accrued interest receivable 5,793 5,985
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$ 1,399,558 $ 1,413,764
============== ==============
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 35,541 $ 54,683
Due to affiliates 20,828 18,437
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Total liabilities 56,369 73,120
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Commitments and contingencies
Limited Partners' capital (37,447
Interests issued and outstanding) 1,397,601 1,395,056
General Partner's deficit (54,412) (54,412)
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Total partners' capital 1,343,189 1,340,644
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$ 1,399,558 $ 1,413,764
============== ==============
The accompanying notes are an integral part of the financial statements.
BALCOR EQUITY PROPERTIES - XII
(An Illinois Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the nine months ended September 30, 1999 and 1998
(Unaudited)
1999 1998
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Income:
Interest on short-term investments $ 49,920 $ 60,007
Other income 26,041
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Total income 75,961 60,007
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Expenses:
Real estate taxes 26,041
Administrative 73,416 128,216
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Total expenses 73,416 154,257
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Net income (loss) $ 2,545 $ (94,250)
============== ==============
Net income (loss) allocated to General
Partner None $ (12,412)
============== ==============
Net income (loss) allocated to Limited
Partners $ 2,545 $ (81,838)
============== ==============
Net income (loss) per Limited Partnership
Interest (37,447 issued and outstanding)
- Basic and Diluted $ 0.07 $ (2.19)
============== ==============
Distribution to Limited Partners None $ 309,889
============== ==============
Distribution per Limited
Partnership Interest None $ 8.28
============== ==============
The accompanying notes are an integral part of the financial statements.
BALCOR EQUITY PROPERTIES - XII
(An Illinois Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the quarters ended September 30, 1999 and 1998
(Unaudited)
1999 1998
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Income:
Interest on short-term investments $ 17,239 $ 19,822
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Total income 17,239 19,822
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Expenses:
Real estate taxes 26,041
Administrative 22,880 37,873
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Total expenses 22,880 63,914
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Net loss $ (5,641) $ (44,092)
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Net loss allocated to General Partner None None
============== ==============
Net loss allocated to Limited Partners $ (5,641) $ (44,092)
============== ==============
Net loss per Limited Partnership Interest
(37,447 issued and outstanding)- Basic
and Diluted $ (0.15) $ (1.18)
============== ==============
The accompanying notes are an integral part of the financial statements.
BALCOR EQUITY PROPERTIES - XII
(An Illinois Limited Partnership)
STATEMENTS OF CASH FLOWS
for the nine months ended September 30, 1999 and 1998
(Unaudited)
1999 1998
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Operating activities:
Net income (loss) $ 2,545 $ (94,250)
Adjustments to reconcile net income
(loss) to net cash used in
operating activities:
Net change in:
Accounts and accrued
interest receivable 192 20,139
Accounts payable (19,142) 19,835
Due to affiliates 2,391 10,552
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Net cash used in operating
activities (14,014) (43,724)
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Financing activity:
Distribution to Limited Partners (309,889)
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Cash used in financing activity (309,889)
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Net change in cash and cash
equivalents (14,014) (353,613)
Cash and cash equivalents at
beginning of period 1,407,779 1,801,748
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Cash and cash equivalents at end
of period $ 1,393,765 $ 1,448,135
============== ==============
The accompanying notes are an integral part of the financial statements.
BALCOR EQUITY PROPERTIES-XII
(An Illinois Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
1. Accounting Policy:
In the opinion of management, all adjustments necessary for a fair presentation
have been made to the accompanying statements for the nine months and quarter
ended September 30, 1999, and all such adjustments are of a normal and
recurring nature.
2. Partnership Termination:
The Partnership Agreement provides for the dissolution of the Partnership upon
the occurrence of certain events. The Partnership sold its final real estate
investment in December 1996. The Partnership has retained a portion of the cash
from the property sales to satisfy obligations of the Partnership as well as to
establish a reserve for contingencies. The timing of the termination of the
Partnership and the final distribution of cash will depend upon the nature and
extent of liabilities and contingencies which exist or may arise. Such
contingencies may include legal and other fees and costs stemming from
litigation involving the Partnership, including but not limited to, the
lawsuits discussed in Note 5 of Notes to the Financial Statements. Due to this
litigation, the Partnership will not be dissolved and the reserves will be held
by the Partnership until the conclusion of all contingencies. There can be no
assurances as to the time frame for the conclusion of these contingencies.
3. Transactions with Affiliates:
Fees and expenses paid and payable by the Partnership to affiliates during the
nine months and quarter ended September 30, 1999 are:
Paid
-----------------------
Nine Months Quarter Payable
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Reimbursement of expenses to
the General Partner, at cost $ 22,216 $ 3,649 $ 20,828
4. Other Income:
During the quarter ended June 30, 1999, the Partnership received a partial
refund of a prior year's real estate taxes on the DeFoors Creek Apartments.
This amount has been recognized as other income for financial statement
purposes.
5. Contingencies:
(a) The Partnership is currently involved in a lawsuit, Masri vs. Lehman
Brothers, Inc., et al., whereby the Partnership and certain affiliates have
been named as defendants alleging claims involving certain state securities and
common law violations with regard to the property acquisition process of the
Partnership, and to the adequacy and accuracy of disclosures of information
concerning, as well as marketing efforts related to, the offering of the
Limited Partnership Interests of the Partnership. The defendants continue to
vigorously contest this action. A plaintiff class has not been certified in
this action. No determinations upon any significant issues have been made. It
is not determinable at this time how the outcome of this action will impact the
remaining cash reserves of the Partnership. The Partnership believes it has
meritorious defenses to contest this claim.
(b) In May 1999, a lawsuit was filed against the Partnership, Madison
Partnership Liquidity Investors XX, et al. vs. The Balcor Company, et al.
whereby the Partnership and certain affiliates have been named as defendants.
The plaintiffs are entities that initiated tender offers to purchase and, in
fact, purchased units in eleven affiliated partnerships. The complaint alleges
breach of fiduciary duties and breach of contract under the partnership
agreement and seeks the winding up of the affairs of the Partnership, the
establishment of a liquidating trust, the appointment of an independent trustee
for the trust and the distribution of a portion of the cash reserves to limited
partners. On June 1, 1999, a second lawsuit was filed and was served on August
16, 1999, Sandra Dee vs. The Balcor Company, et al. The Dee complaint is
virtually identical to the Madison Partnership complaint and on September 20,
1999 was consolidated into the Madison Partnership case. The defendants intend
to vigorously contest these actions. The Partnership believes that it has
meritorious defenses to contest the claims. It is not determinable at this time
how the outcome of these actions will impact the remaining cash reserves of the
Partnership.
BALCOR EQUITY PROPERTIES-XII
(An Illinois Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS
Balcor Equity Properties-XII (the "Partnership") was formed in 1981 to invest
in and operate income-producing real property. The Partnership raised
$37,447,000 through the sale of Limited Partnership Interests and utilized
these proceeds to acquire seven real property investments and a minority joint
venture interest in one additional real property. As of September 30, 1999, the
Partnership has no properties remaining in its portfolio.
Inasmuch as the management's discussion and analysis below relates primarily to
the time period since the end of the last fiscal year, investors are encouraged
to review the financial statements and the management's discussion and analysis
contained in the annual report for 1998 for a more complete understanding of
the Partnership's financial position.
Operations
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Summary of Operations
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The operations of the Partnership in 1999 and 1998 consisted principally of
administrative expenses which were partially offset by interest income earned
on short-term investments. During the quarter ended June 30, 1999, the
Partnership received a partial real estate tax refund relating to the DeFoors
Creek Apartments. As a result of this refund and lower administrative expenses,
the Partnership recognized net income during the nine months ended September
30, 1999 as compared to a net loss during the same period in 1998. During the
quarter ended September 30, 1998, the Partnership paid real estate taxes
related to the DeFoors Creek Apartments. This was the primary reason the
Partnership's net loss decreased during the quarter ended September 30, 1999
as compared to the same period in 1998. Lower administrative expenses also
contributed to the decrease in the net loss. Further discussion of the
Partnership's operations is summarized below.
1999 Compared to 1998
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Unless otherwise noted, discussions of fluctuations between 1999 and 1998 refer
to both the nine months and quarters ended September 30, 1999 and 1998.
As a result of lower interest rates in 1999 and higher cash balances prior to a
distribution to Limited Partners in January 1998, interest income on short-term
investments decreased during 1999 as compared to 1998.
During the quarter ended June 30, 1999, the Partnership received a refund of
real estate taxes paid during the quarter ended June 30, 1998 on the DeFoors
Creek Apartments. This amount has been recognized as other income for financial
statement purposes.
Primarily due to a decrease in legal fees, administrative expenses decreased
during 1999 as compared to 1998.
Liquidity and Capital Resources
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The cash position of the Partnership decreased by approximately $14,000 as of
September 30, 1999 as compared to December 31, 1998 primarily due to cash used
in operating activities for the payment of administrative expenses, which was
partially offset by interest income earned on short-term investments and the
receipt of a partial real estate tax refund related to the DeFoors Creek
Apartments.
The Partnership Agreement provides for the dissolution of the Partnership upon
the occurrence of certain events. The Partnership sold its final real estate
investment in December 1996. The Partnership has retained a portion of the cash
from the property sales to satisfy obligations of the Partnership as well as to
establish a reserve for contingencies. The timing of the termination of the
Partnership and final distribution of cash will depend upon the nature and
extent of liabilities and contingencies which exist or may arise. Such
contingencies include legal and other fees and costs stemming from litigation
involving the Partnership including, but not limited to, the lawsuits discussed
in Note 5 of Notes to Financial Statements. Due to this litigation, the
Partnership will not be dissolved and the reserves will be held by the
Partnership until the conclusion of all contingencies. There can be no
assurances as to the time frame for the conclusion of these contingencies.
Limited Partners have received cumulative distributions of $636.63 per $1,000
Interest, as well as certain tax benefits. Of this amount, $70.00 has been from
Net Cash Receipts and $566.63 has been from Net Cash Proceeds. No additional
distributions are anticipated to be made prior to the termination of the
Partnership. However, after paying final partnership expenses, any remaining
cash reserves will be distributed. Limited Partners will not recover all of
their original investment.
The Partnership sold all of its remaining real property investments and
distributed a majority of the proceeds from these sales to Limited Partners in
1996 and 1997. Since the Partnership no longer has any operating assets, the
number of computer systems and programs necessary to operate the Partnership
has been significantly reduced. The Partnership relies on third party vendors
to perform most of its functions and has implemented a plan to determine the
Year 2000 compliance status of these key vendors. The Partnership is within its
timeline for having these plans completed prior to the year 2000.
The Partnership's plan to determine the Year 2000 compliance status of its key
vendors has involved soliciting information from these vendors through the use
of surveys, follow-up discussions and review of data where needed. The
Partnership has received the surveys from each of these vendors. While the
Partnership cannot guarantee Year 2000 compliance by its key vendors, and is
relying on statements from these vendors without independent verification,
these surveys, testing of systems, where applicable and discussions with the
key vendors performing services for the Partnership indicate that the key
vendors are substantially Year 2000 compliant as of September 30, 1999. The
Partnership will continue to monitor the Year 2000 compliance of its key
vendors during the fourth quarter of 1999. In addition, the Partnership has
developed a contingency plan in the event of non-compliance by these key
vendors in the Year 2000. The Partnership does not believe that failure by any
of its key vendors to be Year 2000 compliant by the year 2000 would have a
material effect on the business, financial position or results of operations of
the Partnership.
BALCOR EQUITY PROPERTIES-XII
(An Illinois Limited Partnership)
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
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Madison Partnership Liquidity Investors XX, et al. vs. The Balcor
- -----------------------------------------------------------------
Company, et al.
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On May 7, 1999, a proposed class action complaint was filed, and on May 13,
1999 was served on the defendants, Madison Partnership Liquidity Investors XX,
et al. vs. The Balcor Company, et al. (Circuit Court, Chancery Division, Cook
County, Illinois, Docket No. 99CH 06972). The general partner of the
Partnership, the general partners of twenty-one additional limited partnerships
which were sponsored by The Balcor Company, The Balcor Company and one
individual are named as defendants in this action. The Partnership and the
twenty-one other limited partnerships are referred to herein as the "Affiliated
Partnerships". Plaintiffs are entities that initiated tender offers to purchase
units and, in fact, purchased units in eleven of the Affiliated Partnerships.
The complaint alleges breach of fiduciary duties and breach of contract under
the partnership agreements for each of the Affiliated Partnerships. The
complaint seeks the winding up of the affairs of the Affiliated Partnerships,
the establishment of a liquidating trust for each of the Affiliated
Partnerships until a resolution of all contingencies occurs, the appointment of
an independent trustee for each such liquidating trust and the distribution of
a portion of the cash reserves to limited partners. The complaint also seeks
compensatory damages, punitive and exemplary damages, and costs and expenses in
pursuing the litigation. On July 14, 1999, the defendants filed a Motion to
Dismiss the complaint. A hearing date on the motion has not yet been set. On
September 20, 1999 the Sandra Dee case described below was consolidated with
this case. Future reports to investors will report only the consolidated case.
The defendants intend to vigorously contest this action. No class has been
certified as of this date. The Partnership believes that it has meritorious
defenses to contest the claims. It is not determinable at this time how the
outcome of this action will impact the remaining cash reserves of the
Partnership.
Sandra Dee vs. The Balcor Company, et al.
- -----------------------------------------
On June 1, 1999, a proposed class action complaint was filed, and on August 16,
1999 was served on the defendants, Sandra Dee vs. The Balcor Company, et al.
(Circuit Court, Chancery Division, Cook County, Illinois, Docket No. 99CH
08123). The general partner of the Partnership, the general partners of
twenty-one additional limited partnerships which were sponsored by The Balcor
Company, The Balcor Company and one individual are named as defendants in this
action. The Partnership and the twenty-one other limited partnerships are
referred to herein as the "Affiliated Partnerships". This complaint is
identical in all material respects to the Madison Partnership Liquidity
Investors XX, et al. vs. The Balcor Company et al. complaint filed in May 1999.
The complaint alleges breach of fiduciary duties and breach of contract under
the partnership agreements for each of the Affiliated Partnerships. The
complaint seeks the winding up of the affairs of the Affiliated Partnerships,
the establishment of a liquidating trust for each of the Affiliated
Partnerships until a resolution of all contingencies occurs, the appointment of
an independent trustee for each such liquidating trust and the distribution of
a portion of the cash reserves to limited partners. The complaint also seeks
compensatory damages, punitive and exemplary damages, and costs and expenses in
pursuing the litigation. The defendants filed on September 15, 1999 a motion to
consolidate this case with the Madison Partnership case. On September 20, 1999,
the motion was granted and this case was consolidated with the Madison
Partnership case. Future reports to investors will report only the consolidated
case. On September 15, 1999, the defendants also filed a Motion to Dismiss the
complaint.
The defendants intend to vigorously contest this action. No class has been
certified as of this date. The defendants believe that they have meritorious
defenses to contest the claims. It is not determinable at this time how the
outcome of this action will impact the remaining cash reserves of the
Partnership.
Item 6. Exhibits and Reports on Form 8-K
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(a) Exhibits:
(4) Certificate of Limited Partnership set forth as Exhibit 4.1 to the
Registrant's Registration Statement on Form S-11 dated July 2, 1982
(Registration No. 2-76947) and Form of Confirmation regarding Interests in the
Registrant set forth as Exhibit 4.2 to the Registrant's Report on Form 10-Q for
the quarter ended June 30, 1992 (Commission File No. 0-11126) are hereby
incorporated herein by reference.
(27) Financial Data Schedule of the Registrant for the nine months ending
September 30, 1999 is attached hereto.
(b) Reports on Form 8-K: No Reports on Form 8-K were filed during the quarter
ended September 30, 1999.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BALCOR EQUITY PROPERTIES-XII
By: /s/Thomas E. Meador
-----------------------------
Thomas E. Meador
President and Chief Executive Officer
(Principal Executive Officer) of Balcor
Partners - XII, the General Partner
By: /s/Jayne A. Kosik
------------------------------
Jayne A. Kosik
Senior Managing Director and Chief Financial
Officer (Principal Accounting and Financial
Officer) of Balcor Partners - XII, the
General Partner
Date: November 9, 1999
----------------
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